NOTE 8 – INCOME TAXES
The provision for income taxes consisted of the following for the years ended December 31:
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(Dollars in thousands)
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2017
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2016
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2015
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Current |
$ | 3,296 | $ | 2,973 | $ | 2,564 | ||||||||||||||
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Deferred |
(167 | ) | (4 | ) | 83 | |||||||||||||||
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Change in corporate tax rate |
101 | – | – | |||||||||||||||||
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Total income tax provision |
$ | 3,230 | $ | 2,969 | $ | 2,647 | ||||||||||||||
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The Tax Cuts and Jobs Act, enacted on December 22, 2017, lowered the federal income tax rate from 35% to 21% effective January 1, 2018. As a result, the carrying value of net deferred tax assets was reduced, which increased income tax expense by $101 thousand.
The income tax provision attributable to income from operations differed from the amounts computed by applying the statutory federal income tax rate of 34% to income before income taxes as follows:
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(Dollars in thousands)
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2017
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2016
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2015
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Expected provision using statutory federal income tax rate |
$ | 3,513 | $ | 3,300 | $ | 2,947 | ||||||||||||||
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Effect of bond and loan tax-exempt income |
(251 | ) | (241 | ) | (216 | ) | ||||||||||||||
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Interest expense associated with carrying certain tax exempt bonds and loans |
6 | 5 | 4 | |||||||||||||||||
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Bank owned life insurance income |
(121 | ) | (94 | ) | (92 | ) | ||||||||||||||
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Other |
83 | (1 | ) | 4 | ||||||||||||||||
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Total income tax provision |
$ | 3,230 | $ | 2,969 | $ | 2,647 | ||||||||||||||
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The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31 were as follows:
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(Dollars in thousands)
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2017
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2016
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Allowance for loan losses |
$ | 1,275 | $ | 1,957 | ||||||||||||||
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Net operating loss carryforward |
– | 84 | ||||||||||||||||
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Unrealized loss on securities available-for-sale |
176 | 450 | ||||||||||||||||
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Other |
50 | 29 | ||||||||||||||||
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Deferred tax assets |
1,501 | 2,520 | ||||||||||||||||
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Premises and equipment |
(363 | ) | (384 | ) | ||||||||||||||
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Federal Home Loan Bank stock dividends |
(376 | ) | (609 | ) | ||||||||||||||
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Deferred loan fees |
(232 | ) | (362 | ) | ||||||||||||||
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Prepaid expenses |
(89 | ) | (182 | ) | ||||||||||||||
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Other |
(279 | ) | (380 | ) | ||||||||||||||
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Deferred tax liabilities |
(1,339 | ) | (1,917 | ) | ||||||||||||||
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Net deferred tax asset |
$ | 162 | $ | 603 | ||||||||||||||
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There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statements of Income. With few exceptions, the Company is no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for years prior to 2014.